It was called disruptive. It was called risky. It could even have been called the result of a mid-life crisis. But five years after Dow Corning reinvented itself with a two-brand strategy, the experiment may now be described as a success.
By changing the way it approached business - putting customer needs first by offering a choice in how to purchase materials and solutions - Dow Corning has experienced double-digit sales growth every year since 2002, with a record sales growth of 13% in 2006 over the same period in 2005.
For its first 50 years, Dow Corning developed an industry with product innovation and technology leadership based on silicon science. Product technologies ranged from silicone fluids used in hair- and skin-care products to advanced silicone sealants that have enabled skyscraper construction and shaped global skylines to materials that protect circuit boards and sensitive electronic assemblies against costly failure. But the business landscape shifted dramatically in the 1990s. With a global recession, currency crises, and increased competition from both global and local suppliers around the world, product innovation alone could no longer drive or sustain the company’s success.
The launch of its online business, Xiameter, was a bold step. The new business model, designed for a certain market segment - price-seekers - came with a risk of cannibalizing the traditional Dow Corning®brand if current customers moved to the new offering. While Xiameter provides market-driven prices and products that do not come with added services, the Dow Corning brand enables customers to purchase products along with full service and solutions offerings.
“Severe cost pressures made customers more wary and demanding,” said J. Donald Sheets, chief financial officer and Americas area president, Dow Corning. “Fortunately, we recognized that our environment was changing, and we were able to adapt. Our two-brand strategy offers the choices and solutions that customers need to help them solve problems and seize opportunities.”
The first of its kind in the chemical marketplace, and unrivaled to date, Xiameter has helped bring change to the industry. Designed for customers who can order in large volumes and do not need extra services or technical support, it complements the corporate brand, which comes with expertise, advice, counsel, labs, technical support, and scientists. So rather than cannibalizing the corporate brand as some feared, Xiameter has only made it stronger.
In 2000, Dow Corning had virtually zero online sales. By 2006, however, the percentage of combined Dow Corning and Xiameter sales conducted online had risen to 30% - significantly higher than the industry average. According to a benchmark study conducted by the American Chemistry Council, chemical companies in America on average conducted just 11% of their sales through e-commerce methods in 2004 and 12.8% in 2005.
Dow Corning achieved investment payback only four months after the launch of Xiameter.
The significant reduction in inventory, which is attributed to Xiameter’s products being “made to order” with required minimum lead times, freed up working capital as well.
In its first year, Dow Corning estimates that its new business model reduced logistics costs by 60%, saving the company approximately $3.5 million, mainly due to the elimination of warehousing costs and more efficient shipping of larger loads.
Xiameter also serves as a means of geographic expansion for the corporation. Originally selling products in 50 countries, Xiameter is now configured to sell in 83 countries, some of which were new to Dow Corning.
“What we have achieved over the past five years not only indicates our success, but it shows that we have been able to help our customers succeed as well by offering them choices in how they want to purchase materials,” said Shelley Bausch, global executive director, Xiameter.
Offering customers choices and bringing new value propositions to the silicone marketplace, Xiameter was only one part of the company’s larger global repositioning strategy, which was based on the results of Dow Corning customer feedback and segmentation studies.
The Dow Corning brand was re-focused on providing a variety of solutions and services, in addition to the thousands of silicon-based materials the company offered. By making this change coincide with the launch of Xiameter, the company was able to reinforce the value of its corporate brand.
“We took advantage of a tremendous opportunity to create solutions and provide services to our customers,” said Sheets. “Our customers told us they were willing to pay for these offerings.”
Today, Dow Corning provides a range of solutions that includes full formulation development, analytical and application testing, and environmental health and safety services.
Dow Corning Corp. provides performance-enhancing solutions to serve the diverse needs of more than 25,000 customers worldwide. A global leader in silicon-based technology and innovation offering more than 7,000 products and services, Dow Corning is equally owned by The Dow Chemical Co. and Corning Inc. More than half of Dow Corning’s annual sales are outside the United States. For more information, visit www.dowcorning.com.
Xiameter, a global brand of Dow Corning Corp., offers market-driven prices for high-volume shipping units of commonly used silicon-based materials. Launched in 2002, the business offers more than 400 products, including silicone fluids, sealants, emulsions, and rubber. Xiameter reduces costs to customers through streamlined services, the application of straightforward business rules and web-enabled transactions. For more information, visit www.xiameter.com.